Securities and Exchange Board of India (SEBI) introduced a transformative initiative aimed at promoting passive investment in the Indian mutual fund sector. The new “Mutual Funds Lite” (MF Lite) framework has been designed to cater specifically to passively managed mutual fund schemes, providing a relaxed and simplified regulatory framework compared to traditional actively managed funds.
Categories of Passive Schemes Under the MF Lite Framework
The MF Lite framework will be applicable to a select range of passive mutual fund schemes, primarily those based on equity indices, debt indices, gold and silver ETFs, and certain overseas ETFs. The primary focus will be on schemes that track broad-based indices or established benchmarks, ensuring that the passive funds remain diversified and credible.
The first phase of implementation of the MF Lite framework will cover the following categories of schemes:
Equity Passive Schemes: These are funds that track domestic equity indices, including broad-based indices or benchmarks used by actively managed funds.
Debt Passive Schemes: This includes funds based on government securities (G-Secs), treasury bills (T-bills), state development loans (SDLs), or domestic constant-duration passive debt funds.
Gold and Silver ETFs: These exchange-traded funds invest in gold or silver, offering an easy and liquid way to gain exposure to the commodities.
Overseas ETFs and Funds of Funds (FoFs): These are funds investing in foreign ETFs or funds that track single overseas passive indices.
Additionally, the framework outlines certain quantitative thresholds for these funds, such as a minimum collective Assets Under Management (AUM) of INR 5,000 Crore for domestic equity or debt passive funds. Similarly, overseas equity passive indices must have an AUM of at least $20 billion to qualify under the MF Lite framework.
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